GBP: Fractious Brexit negotiations in prospect – Standard Chartered

According to the analysts at Standard Chartered, the UK’s negotiated departure from the EU remains a focal point for investors in GBP assets.

Key Quotes

“The UK government will give notice on its EU membership by triggering Article 50 on 29 March. Assessing the kind of deal that will be struck is a key unknown for investors, and the GBP’s fortunes will be closely tied to the success of UK-EU negotiations, which have already undermined the GBP to a significant degree. Indeed, the GBP trades at a significant discount to the 10Y yield on a nominal effective exchange rate (NEER) basis. However, a two-year deadline to agree a deal is ambitious and fraught with risks that suggest this discount could become greater still.”

“Key next steps include the European Commission agreeing its negotiation mandate, the UK’s Great Repeal bill, a UK-EU “divorce” settlement and ratification of a final deal across EU member parliaments. Two years is a long time in politics, but perhaps not long enough to strike a Brexit deal.”